På trykk i American Journal of Agricultural Economics

Abstract: Empirical evidence suggests that agricultural futures price movements have fat-tailed distributions and exhibit sudden and unexpected price jumps. There is also evidence that the volatility of futures prices is time-dependent. It varies both as a function of calendar-time (seasonal effect) and time to maturity (maturity effect). This paper extends Bates (1991) jump-diffusion option pricing model by including both seasonal and maturity effects in the volatility specification. An in-sample fit to market option prices on wheat futures shows that the suggested model outperforms previous models considered in the literature. A numerical example indicates the economic significance of our results for option valuation. Mer om American Journal of Agricultural Economics